Oyeyimika Adeboye, MD Cadbury Nigeria Plc.

By OKEY ONYENWEAKU

Hard times usually induce cold sweat in cold boardrooms. Many companies and businesses struggle with survival at such times. But visionary and creative managers are still able to mine gold from even some of the most forsaken patches of land.

The foregoing may be the case with Cadbury Nigeria Plc, which going by its current form, appears to have re-invented its management strength and creativity in the last few years and is now posting growth in its profitability numbers by as much as 26 per cent.

In the company’s audited results for the year ended 2019, its overall revenues also rose by 9 per cent, up from N35.973 billion in 2018 to N39.326billion in 2019.

At the close of business in 2019, its profit after tax similarly increased by 30 per cent from N823million to N1.070billion.

Despite the generally unstable and close to the confirmedly negative macro-economic environment, Cadbury’s total equity rose 7 per cent from N12.676 billion in the previous year to N13.566 billion in 2019.

Impressed by its sudden burst in good fortunes, the board of the giant confectionery has at the same time, therefore, proposed to pay shareholders a dividend of N912.2 million, representing a 93 per cent increase over the N471.428 million dividend pay-out of 2018. The dividend payout amounted to 49 kobos per share.

However, analysts have called the company’s attention to its inventories which rose by 3.36 per cent.

Whereas selling and selling distribution expenses and Administrative expenses increased marginally, Net finance income rose from the negative of -N475million to a positive position of N185.2 million in 2019.

There have been strong indications that the company’s result was going to be impressive when the performances of the first, second and third quarters were made public. This is no mean result.

These results showed vigour which was reflected in its Profit before tax of the first quarter which grew by 2200 per cent to N723.9million, the PBT grew by 325.8% to N957.06 million from a loss of N423.77million recorded in the previous year in the second quarter 2019.

The company also achieved a profit before tax of N925.75 million, representing a growth of 266.2 per cent from the previous years’ figure in the third quarter of 2020.

Its revenues for the third quarter rose by 7.2 per cent to N28.91 billion and Net Assets also increased by 1.4 per cent to N12.85billion from N12.68 billion achieved in the previous year of 2018.

A reliable source, who has keenly followed the progress of Cadbury told Business Hallmark that in addition to its lean product line with Bournvita, Tom-Tom, Buttermint, featuring as core stars of the pack, the company has also been beset by the introduction of some failed products and management issues over the years.

Apart from the development limiting its competitive edge, the source noted, Kraft International which acquired Cadbury in 2012 has not helped matters as its subsidiary, Mondelez, the snacks branch of the parent company, is not inclined to help the company to reinvent itself with fresh investment and product development.

He also noted that the company’s cash-cow, Bournvita which accounts for about 80% of its revenues is facing very stiff competition in the market.

From a strong confectionery whose products dominated the market through the years, and more especially Bournvita, which was served on the breakfast table of many-a-household, to a firm that appears over-whelmed by stiff competition, Cadbury seems to be fighting for survival as it is increasingly losing ground to competitors such as Nestle Nigeria with Milo, Promasidor with Cowbell, Ovaltine, among other related products which come in very small micro packages.

‘’In the midst of all the macro-economic challenges and border closure, the company has remained creative which impacted its profit positively’’, an inside source told BH.

MARKET SHARE

It is not very easy to determine Cadbury’s market share.  Whatever the situation, its products are still market leaders in the market, a position it has occupied since the ’70s. Bournvita, TomTom and Buttermint are popular names that are dominant in Africa. The new rebranding and the direct sales strategy it recently adopted may have shot up to its market share again. But, these products seem to be facing stiff competition from Milo from Nestle Nigeria, Ovaltine, from Ovaltine, Cowbell choco from Promasidor among others. Many customers who spoke to BH confessed that the rebranded Bournvita is now more qualitative and richer in choco. Cadbury has shrunk its product lines to concentrate on the three major products listed above for strategic reasons.

BH investigation also reveals that Bournvita now compares with Nestle’s Milo. Though some believe that the market for Cadbury’s products appears to have peaked, product dealers have a different opinion saying that it is still dominant in the market. “If you want a good candy what comes to mind is Eclairs or TomTom,” a customer said.

Challenges

Market analysts have attributed the weak performance of manufacturing companies to the prevalent macroeconomic challenges in Nigeria. While some of them fingered lack of economic direction of President Buhari as one of the strong reasons, others have hinged it on tight regulation of both the fiscal and monetary authorities. Yet a third group has sadly pointed at the shrinking revenues of the nation, caused by the volatility in crude price, lack of productivity and increased funding for security, in addition to low disposable income in the hands of consumers. These, market observers believe have also been responsible for the near weak performance of other sectors of the economy.

These have dealt a heavy blow on business operations as many firms seem to be struggling to survive.

The leadership of the Manufacturers Association of Nigeria has always fingered lack of disposable income in the economy due to delayed budget as the cause of mounting inventories of unsold stock in the warehouses of Manufacturers.

“Most of our members complained of their unsold stock inventories because people are not buying their goods, which can be attributed to the delay in the passage of the 2018 budget.

“A situation where you generate your power for production does not make you competitive, because whatever is produced in this country is produced at a higher cost when compared to other parts of the world.

“The same goes for the transportation system as we still move our good via roads, even the heavy-duty goods. Such good which should go by rail lack enough rail lines to carry them.

“There is a need to develop the transportation sector to the point where it can support the manufacturing sector and also support the economy,” they said.

Market observers have also noted that manufacturing capacity utilization has continued to slide since it hovered between 70 and 75 % from 1975 to 1980s. There is also stiff competition in the industry as Cadbury, Cowbell and many other small companies continue to push for higher market share in the F$B market.

Whereas the government has excluded importers of 43 items from accessing forex to boost their market performance, the recent closure of the border has impeded exportation of manufactured goods.

But these have not deterred some like Cadbury Nigeria who appears to have proved they can always run against the tide and still deliver fairly good margins to investors.

In Cadbury’s instance, the company has generally performed well over the years.

Cadbury as an investment option

To invest in Cadbury now is dicey. The company has only made profits in 2015 and 2017, 2018 and recently in 2019, counting from 2006 to date. Investors were only paid 65 kobo per share as a dividend in 2015, 16 kobo in 2017 and 30kobo, 25 kobo in 2018 and 49 kobo in 2019. Investors believe the act could signify better times in future.

Broad street observers noted that the company’s stock is not only lagging in value because of its predicament but that the current weak market is also taking a toll on its shares. However, while its stock has lost 41.2 per cent year on a date, it is trending with the weak market which lost about 18 per cent at the close of business on Thursday, March 26, 2020, at N6.20 per share. Its share price stood at N6.20 per share on March 26, 2020.

The company’s share price is a far cry from its competitor Nestle Nigeria Plc which share price closed at N765.00 per share on March 26, 2020.

However, Cadbury Nigeria’s management had assured shareholders that the company would focus on four key strategic initiatives to realize its growth ambitions this year, after taking major hits in sales and profit in the previous years.

Its management had told investors that the company would concentrate efforts at increasing its market share in the powdered-drink and candy categories while investing in innovation and the enhancement of its product portfolio.

“One of the major strengths of our company has been operational efficiency, as aligned with global best practices.

”Constant improvements in operational efficiency helped us to offset difficulties in the operating environment,” the management had said. But market observers are worried that the company has found it difficult to re-invent itself. And they have queried how a company that wants to remain competitive depends on very slim product lines.

Managing Director, Crane Securities Limited, Mr Mike Ezeh told Business Hallmark that the incident of financial misstatement of 2005/2006 is still haunting the company. This is in addition to what he calls its conservatism.

President, Progressive Shareholders’ Association of Nigeria, Mr Boniface Okezie believes that Cadbury still has the potential to turn its fortunes around but he advised its management to show aggression in marketing as well as increase its product lines.

Cadbury Nigeria Plc had appointed Mrs Oyeyimika Adeboye as Managing Director, the effects last year 2019. Mrs Adeboye took over from Mr Amir Shamsi, who moved on to a new role within Mondelēz International, the parent company of Cadbury Nigeria.

Mrs Adeboye is the first woman to be appointed Managing Director since the establishment of Cadbury Nigeria over five decades ago.

Mrs Adeboye, a chartered accountant, joined the Board of the Company in November 2008, as Finance and Strategy Director, West Africa.

A few market analysts still believe that Cadbury may yet be able to fend off its challenges and return to vigour soon.

In the early 1960s, an initial operation was established to re-pack imported bulk products. This packing operation grew rapidly into a fully-fledged manufacturing operation and resulted in the incorporation of Cadbury Nigeria Limited in January 1965. In 1976, the firm became a publicly listed company with shares traded locally on the Nigerian Stock Exchange.

Cadbury Nigeria has grown to become a household name, providing consumers with much-loved brands and revenue of N39.236b in 2019.